Spotify Q1 2025 earnings name: Daniel Ek talks development, pricing, superfan merchandise, and a future the place the platform may attain 1bn subscribers
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Spotify delivered one other quarter of working revenue and subscriber growth in Q1, at the same time as broader financial turbulence continues to create uncertainty throughout international markets.
On Tuesday (April 29), the streaming large reported a report quarterly working revenue of €509 million ($535.6m) for first three months of the yr, which was – regardless of lacking its personal goal €548 million – its highest quarterly working revenue up to now.
SPOT additionally beat its personal subscriber steering by 3 million customers, reaching 268 million premium subscribers.
Spotify’s Q1 outcomes included whole quarterly income (together with Premium and ad-supported) of €4.190billion ($4.4bn), which was up 15% YoYat fixed foreign money.
On Spotify’s earnings name, CEO Daniel Ek struck a practical tone in regards to the macroeconomic setting. “There’s quite a lot of uncertainty on the planet. And when volatility rises, it’s pure to ask who could be affected and the way. And from the place I sit, Spotify is faring higher than most,” Ek informed analysts.
“The underlying information in the mean time could be very wholesome,” Ek emphasised. “Engagement stays excessive, retention is powerful, and because of our freemium mannequin, individuals have the pliability to stick with us even when issues really feel extra unsure.
“So sure, the brief time period might deliver some noise, however we stay assured within the long-term story, and the course we’re heading in feels clearer than ever.”
Ek was joined on the decision by Chief Enterprise Officer & Co-President AlexNorström, CFO ChristianLuiga, and Gustav Söderström, Spotify’s Co-President, Chief Product & Expertise Officer
Listed below are six extra issues we realized from SPOT’s management crew on the decision…
Yalcin Sonat / Shutterstock
1. Spotify continues to be engaged on a Tremendous premium tier — however it “want[s] companions to return to the desk”
Spotify’s management crew was requested in regards to the platform’s much-anticipated “superfan product”.
Bloomberg reported earlier this yr that Spotify is getting ready to launch a “Music Professional” tier as quickly as this yr, doubtlessly priced at a further $5.99 per 30 days on high of a Premium subscription.
This higher-priced tier is predicted to incorporate perks like early entry to live performance tickets, AI-powered remix options, and higher-fidelity audio.
The response from Daniel Ek and Alex Norström (Chief Enterprise Officer & Co-President) appeared to substantiate Spotify’s dedication to launching pricier tiers round “new choices”, however emphasised the necessity for cooperation from trade companions to make that occur.
“With reference to increased tiers, we see nice potential in them as we’ve talked about earlier than,” stated Norström. “So creating increased tiers round new choices is one thing we’re working in direction of”.
He added, nevertheless, that “we want alignment and assist from our trade companions to supply these sorts of latest experiences to our customers. And I feel it’s additionally value noting that we are going to proceed to search for new methods to spend money on our premium providing as we’ve achieved all alongside.”
“We’d like alignment and assist from our trade companions to supply these sorts of latest experiences to our customers.”
Alex Norström
Daniel Ek echoed Norstrom’s feedback, explaining that “for the very, very long run, it’s an upside alternative for Spotify”.
He added: “For the close to time period, the best way to consider it for Spotify is, we’re not depending on [the new tier] for development, however we wish to make it occur.
“So that is actually one the place I’d put, once more, the emphasis is for the superfan, we do want the companions to return to the desk and be a part of this journey.”
It’s essential to spotlight right here that they didn’t affirm which companions they have been referring to precisely.
They may effectively have been referring to rightsholders, however labels aren’t the one entities Spotify wants to barter with earlier than it may launch its Music Professional tier – particularly if it desires live performance tickets within the combine.
We all know, for instance, that live performance large Dwell Nation has held ticketing talks with Spotify, Apple, andAmazon round presale entry for super-premium tier subscribers.
Discussing these talks with buyers on Dwell Nation’s earnings name in February, CEO Michael Rapino stated: “So far as the most recent spherical with Spotify and Apple and Amazon, they’ve approached us all. We’ve talked to all of them about concepts on in the event that they needed stock.
“There’s a price to that, and we might entertain and have a look at that possibility if it made sense for us compared to different choices we’ve for that presale, which is a really precious asset.”
In the meantime, on Tuesday, throughout the Q1 earnings name of one among Spotify’s greatest companions, Common Music Group, the corporate’s management crew was additionally requested in regards to the timeline for the introduction of super-premium subscription tiers at DSPs like Spotify.
Michael Nash, UMGs EVP and Chief Digital Officer, stated: “We’re deeply engaged with all of our key companions, together with Spotify on this class of alternative, and we’re very inspired by the course of all these conversations.
He added that “We hope to have the ability to publicly elaborate on the collaborative plans that we’re growing later this yr” and that UMG is “very inspired to listen to [Spotify] executives affirm on [their own Q1 earnings call] that with regard to increased tiers, they see nice potential in them… and we have been additionally inspired to listen to them reaffirm that creating increased tiers round new choices is one thing that we’re working in direction of.”
Credit score: Sir. David/Shutterstock
2. Spotify’s Trade Relations Are “Higher Than Ever”
Spotify’s management crew was requested in regards to the present state of the corporate’s “relationship with the broader trade”.
Daniel Ek’s evaluation of the corporate’s trade partnerships was optimistic. “I’ve a straightforward reply to that,” he stated.
“We at the moment are in a scenario the place the connection between us and our trade companions is healthier than it’s ever been in our historical past,” he added.
“We at the moment are in a scenario the place the connection between us and our trade companions is healthier than it’s ever been in our historical past.”
He continued: “That actually implies that we’re actually aligned on the incentives, the place all of us [are] attempting to develop the music trade. And as such, we’re actually in fixed dialog with one another to consider all this stuff.
“I foresee this to proceed to be the case, and there’s going to be much more enhancements within the years forward.”
When requested if SPOT’s Q1 outcomes mirrored these new offers with Common and Warner Music, and if the “direct publishing relationships” included as a part of these offers “impacted [Spotify’s] prices,” CFO Christian Luiga stated: “All the things that we’ve signed and contracted is mirrored on our monetary numbers in the best way we’ve agreed with and in the best way we’ve entered the contract.”
3. Daniel Ek doesn’t assume it’s ‘not possible to get to 1 billion subscribers’ sooner or later
When requested about balancing development investments with rising margins, Daniel Ek shared his imaginative and prescient for Spotify’s future.
“Basically, we consider this enterprise to be a lot larger than most different individuals consider it to be,” Ek stated.
“I don’t see it [as] not possible to get to 1 billion subscribers.”
daniel Ek
To elucidate, he shared a narrative from Spotify’s earlier years: “I bear in mind again within the day after we hit 1 million subscribers, and I stated the purpose was to get to 100 million subscribers. And I feel most of them thought I used to be fully nuts.”
Now at 268 million premium customers, Ek sees even larger potential.
“When you ask me what’s the North Star purpose right here, on what number of paying clients we may get, I don’t know, however I don’t see it [as] not possible to get to 1 billion subscribers.”
This explains why development stays a high precedence for Spotify. As Ek summarized elsewhere on the decision: “No.1, 2 and three on our agenda is to prioritize development initiatives.”
4. AI Is Reworking Product Improvement and Inner Operations at Spotify
Gustav Söderström addressed a query about AI’s function in driving productiveness on the platform, revealing that Spotify has lengthy considered AI as central to its mission.
“Again in 2018, we stated internally that machine studying, as AI was known as again then, was the product,” Söderström defined. “What we’re essentially attempting to do as an organization is to know you as a consumer.”
Söderström additionally highlighted how AI is now enabling new consumer experiences: “AI is admittedly the subsequent step and evolution of that, the place machine studying allowed personalization, AI additionally permits for real-time interactivity and reasoning on high of your information,” he famous, pointing to SPOT’s AI playlists having just lately rolled out in beta to over 40 markets.
“I haven’t discovered the necessity to truly pressure our group to undertake new instruments or AI in any respect. Our workers is often very enthusiastic about all new expertise, and so they’re often method forward of the curve.”
Gustav Söderström
On the productiveness entrance, Söderström highlighted how AI is rushing up work on the platform: “We’re additionally seeing AI being utilized in the remainder of the product improvement cycle, particularly in prototyping of latest experiences that transfer rather more shortly and with increased constancy after which much less dependence on key engineering assets.”
He additionally defined that Spotify doesn’t wrestle with AI adoption internally: “Normally, I’d say that as in earlier expertise shifts at Spotify, I haven’t discovered the necessity to truly pressure our group to undertake new instruments or AI in any respect,” he stated.
“Our workers is often very enthusiastic about all new expertise, and so they’re often method forward of the curve. So the true job for me, and us as managers, is to allow them to make use of AI by signing the suitable instruments, eradicating authorized blockers round information utilization, exposing the suitable information units and so on. for these instruments to really be helpful and protected to make use of for our staff on high of proprietary firm information.
“In order that’s the place we invested the previous few years, and the adoption itself is just not a problem for us. I’m very enthusiastic about that.
5. Video Is Driving Vital Engagement Development at Spotify
Daniel Ek was requested whether or not a free ad-supported streaming TV providing may work on Spotify, prompting insights into how video is increasing the platform’s utility.
“I feel structurally, there’s clearly no purpose why it wouldn’t work,” Ek stated, explaining that “an important purpose why we’ve added video is as a result of creators are asking us for it.”
He added: “Whereas I’m positive in some unspecified time in the future, there shall be a possibility for us so as to add completely new creators onto the platform, the true purpose that we’ve been going after is that we realized so lots of our current creators needed to specific themselves in several methods.
“And also you’ve seen us over the previous few years now add that with every little thing from music creators now having the ability to have full-length music movies onto the platform.
“One of the best issues at Spotify has began like that, the place individuals are actually telling us why aren’t you doing this?”
Elsewhere on the decision, Söderström shared proof of video’s development on the platform: “We’ve seen a 44% year-over-year development in time spent with video content material. Particularly Gen Z are main this development, spending 81% extra time with video on Spotify year-over-year.”
6. Daniel Ek reiterated that there shall be extra segmentation of the streamer’s providing, and that pricing shall be a “huge” alternative for the platform within the coming years
Daniel Ek was requested on the decision about how huge of a possibility “pricing” i.e worth rises shall be over the subsequent a number of years.
Analyst Wealthy Greenfield famous that “after we take into consideration the pricing, the price of Spotify has solely risen $2 from $10 to $12 because you launched”.
The corporate introduced in July 2023 that the value of its flagship particular person subscription tier could be rising for the primary time within the US, from $9.99 per 30 days to $10.99, following widespread calls to take action from a number of music trade leaders.
SPOT raised the value for its Premium tier in the USA once more in June 2024, to $11.99.
Spotify can be getting ready worth will increase throughout a number of international markets in Europe and Latin America beginning this summer season ( however not within the US).
Daniel Ek defined: “It’s actually essential to know that there’s varied levers you possibly can pull at varied phases.
“On the very first inning, we didn’t even hassle all that a lot about conversion [from free to paid] as a result of the important thing purpose was simply getting individuals within the door. Then over time, we sort of added yet one more [leg] to the stool the place we obtained so much higher at changing individuals from free to paid. We did so by including issues just like the Household plan and Pupil plans and so forth.
“The story I’m actually right here attempting to color is that within the very early innings, the first technique to develop is to maintain that worth at an insanely whole lot. And that’s the place we began with Spotify. It was simply an insanely whole lot. It was simply too good to be true, and that’s what led to a lot of the early development.”
Ek argued that “once you’re nonetheless rising tremendous quick, elevating costs is just not a sensible technique,” however that “as development then form of modulates as you get bigger and bigger into the market, pricing turns into one other leg to the stool, one other lever to tug”.
“We’re simply within the early innings. I nonetheless consider there shall be extra segmentation. However sure, I feel the chance [in pricing] is huge.”Music Enterprise Worldwide
